Disagreeing on Amazon’s future

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as amazon announced a deal with ofoto that will provide full-service photography offerings, analysts are disagreeing over whether the company will ever make money as it continues to expand. yesterday, amazon stock was down early and then ended up for the day; today, however, it is down again. this up-and-down stock pricing shows that investors are disagreeing as much as the analysts are.

one analyst said that amazon's continued expansion into different product and service areas means it will never be able to trim its operational costs enough to make a profit. her warning was what sent amazon stock down early yesterday, but investors pulled it back up. others feel that amazon's expansion will be the key to its profitability. their thinking is that amazon will continue to expand and test various markets, eventually figuring out which ones will work best for its business model. since photography services and camera products are a higher-margin area than books, the ofoto deal is a good thing in those analysts' eyes. expansion into new areas also means an even broader customer database, which may already be amazon's most valuable asset.

naysayers feel, however, that even if amazon hits its numbers for this year's fourth quarter it won't mean profitability is around the corner. to them, the only possible upside to amazon's continued expansion is that it will have more areas to sell off if that becomes necessary.

sam's opinion
this is a classic business class dilemma: do you keep expanding and hope to find the right mix eventually, or do you concentrate only on certain areas until you can make a profit? most successful businesses go through the same questioning–we here at geek.com do it frequently.

i'm not sure what the best answer for amazon is, but i tend to agree with these expansion moves, even though i also feel it will push amazon further away from reaching profitability. my position is kind of a mix between the naysayers and the amazon-backers: i feel the expansion, even into higher-margin areas, will cost amazon more money and contributes to the dilution of the amazon brand in people's minds (as i've stated in other news opinions); however, i also feel that the expansion and investments that amazon makes in other companies gives it a strong base to withdraw from as it finds what works best. for instance, if the photo services work out really well, that gives amazon the leeway to sell off something that's not performing well–maybe the kitchen stuff area, for example.

i still believe that amazon may be trying to do too much, but if bezos and the rest of the decision makers have a long-term goal of scaling back some of the services at some point, i feel strongly that the money will start rolling in soon enough. if, however, they really are intent on making amazon the one-stop-shop for everything, i think investors will be in for a mighty long and winding road.

user comments 3 comment(s)

ofoto(1:44pm est thu oct 05 2000)i'm sad to see ofoto get sucked into what's fast becoming the evil empire of merchandising; amazon. since the personal information thing, i've stopped using amazon and will now have to stop using ofoto.

it's sad, because ofoto was/is a really nice service. – by deafdude

me too deaf dude(2:10pm est thu oct 05 2000)i quit using amazon after they revised their privacy statement. since ofoto is really more like a selected partner and not actually owned by amazon, they still may be able to offer a quality service.

i was interested in using ofoto to make photo quality prints from digital images. fwiw, i hear seattle filmworks provides a similar service. it is supposed to be of good quality/value though i haven't used it myself. – by potato head

screw amazon(6:24am est fri oct 06 2000)…i hope they die in flames. i hope they go down like a frech whore. new “privacy” statement, eh? screw you. – by me